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FRAUDBARON.com
The Anti-Fraud Professionals'
Source for Fraud News
#514 Updated: 11/29/07 11:12 a.m.

New Guidance Paper "Managing the Business Risk of Fraud: A Practical Guide"
Released for Comments.
ACFE.com | 11/29/07 | Press Release
New Guidance Paper "Managing the Business Risk of Fraud: A Practical Guide" Released for
Comments.  The ACFE, AICPA, and IIA have released an exposure draft of a joint project
regarding guidance to organizations on establishing an approach to managing the risk of
fraud. The paper will be open for comment through December 21, 2007 with a final version
of the paper due out in January 2008.  Click here to download the PDF of the white paper
exposure draft.

Police investigating suspected embezzlement from youth shelter
The Mercury News | 11/28/07 | Associated Press
LOS ALAMITOS, Calif.—A former employee is suspected of embezzling $200,000 from a youth
shelter that provides temporary housing for at-risk teens, officials said.  Luciann Maulhardt,
executive director of Casa Youth Shelter, said an employee was fired immediately after the
money was found to be missing. The matter was turned over to police who said an
investigation has begun.  Although the missing money comprises a major portion of the
shelter's $900,000 annual budget, "not one shelter bed will not be provided to a youth,"
Maulhardt said. "No service will be reduced."  Maulhardt said the alleged fraud came to her
attention after she discovered that someone had stolen her identity. She also said her
name was forged on shelter checks and unauthorized items were charged to her credit
cards.  The nonprofit agency, which officials say has counseled and sheltered more than
10,000 runaways and youths in crisis and worked with 38,000 family members in its 30-
year history, is one of only two of its kind in Orange County.

Man gets 26 years in mortgage fraud
businessweek.com | 11/28/07 | Eric Schelzig
A man who pleaded guilty to a mortgage fraud scheme that affected more than 100 people
has been sentenced to more than 26 years in prison.  Matthew Bevan Cox was sentenced
in federal court in Atlanta earlier this month to the prison term followed by five years of
supervised release. He was also ordered to pay $5.9 million in restitution and to forfeit $6
million in property.  "The Cox victims include innocent homeowners, individual lenders,
corporate lenders, banks, title companies, closing attorneys and those whose identity was
stolen," federal prosecutors said in their sentencing recommendations.  "Cox stole the
identity of 48 adults and 8 minors for use in his mortgage fraud, even going to court to
change the true name of one such victim," according to the filing.  Cox, 37, was arrested in
Nashville last year after police received a tip from someone who had seen Cox's picture
on the Secret Service's most-wanted list.  Cox was prosecuted in federal court in Atlanta in
a case that consolidated charges in Georgia, Tennessee and Florida. Cox pleaded guilty in
April.  The Secret Service said Cox used at least 10 aliases and may have had plastic
surgery to alter his appearance while on the lam.  "His crimes resulted in clouded property
titles in several states with years of unresolved litigation, a trail of over 100 victims and
missing money," David E. Nahmias, the U.S. attorney in Atlanta, said in a release. Ed
Yarbrough, the U.S. attorney in Nashville, said Cox stole identities by conducting what he
called "federal surveys" of homeless people and drug rehab patients to get their personal
information.  Cox then used the information to get driver's licenses, lease mail boxes, open
bank accounts, secure mortgage loans and apply for a passport he used to travel to
Greece, Yarbrough said.  Authorities put out a warrant for Cox and his partner Rebecca
Marie Hauck in 2004 for identity theft and mortgage fraud schemes in Georgia, Florida,
Alabama, South Carolina and North Carolina.  Hauck was arrested in March 2006 while living
under a stolen identity in Houston. She pleaded guilty and was sentenced to five years, 10
months in prison. She was also ordered to pay restitution of $1.2 million.  Cox's attorney,
Mildred Geckler Dunn, said in a filing that Cox had convinced himself that he wasn't hurting
his victims.  "He wrongly, but honestly, believed his crime to be 'victimless' because the title
insurance companies would pay off the loans as a cost of doing business and no one would
lose any money," she said in a court filing.

Ex-NatWest Bankers Plead Guilty to Enron Fraud Charge
Bloomberg.com | 11/29/07 | Laurel Brubaker Calkins
Nov. 28 (Bloomberg) -- Three former Greenwich NatWest Ltd.  bankers pleaded guilty to a
charge stemming from an Enron Corp.- related fraud scheme.  David Bermingham, Giles
Darby and Gary Mulgrew, all 45, each pleaded guilty to one count of wire fraud in Houston
federal court today, five years after they were first charged with skimming $7 million from
an off-books partnership designed by former Enron Chief Financial Officer Andrew Fastow.
They agreed to serve 37 months in prison and pay $7.3 million in restitution to the Royal
Bank of Scotland. Greenwich NatWest is now a unit of the Edinburgh-based bank. U.S.
District Judge Ewing Werlein must approve their plea agreements.  ``Today's guilty pleas
demonstrate that the extent of the fraud at Enron went well beyond U.S. borders,'' said
Assistant Director Kenneth Kaiser, FBI Criminal Investigative Division. ``The FBI remains
committed to bringing to justice those responsible for corporate fraud, no matter where our
search may lead.''  The three men, all British citizens and known as the ``NatWest Three,''
were extradited to the U.S. in July 2006 to face charges that they plotted with Fastow to
deceive NatWest about the true value of the bank's stake in an Enron off-books
partnership that the then-CFO controlled. They have remained in Houston since, under
court-ordered electronic monitoring, in anticipation of their Jan. 7 trial.  Each man was
originally charged with seven counts of wire fraud and faced up to 35 years in prison, if
convicted on all counts.  Mulgrew declined after the hearing to say why he was pleading
guilty after five years of protesting his innocence, other than to say, ``I just want to go
home.'' Dan Cogdell, Bermingham's lawyer, said a key factor in the bankers' decision to
plead guilty is the U.S. government's commitment to support their request to serve most of
their prison time in the U.K.  ``We've got the government's commitment to try to work with
us on that,'' Cogdell said after the hearing.  He said the bankers most likely will be required
to serve six to nine months in a U.S. prison before they can apply for a transfer. The
bankers will pay the bulk of their $7.35 million in restitution to the Royal Bank of Scotland
through a civil judgment they will enter in the U.K. Cogdell said putting a British entity in
charge of the repayment will remove the standard requirement that full restitution be made
before a prisoner can be transferred to a foreign facility.  The men will remain on bond
under electronic monitoring until their Feb. 27 sentencing. They cannot leave the Houston
area. They may now meet with each other outside the presence of their attorneys,
something they've been unable to do during the 17 months since their extradition.  Reid
Figel, Mulgrew's lawyer, gave reporters a prepared statement after the sentencing on
behalf of all the bankers and their lawyers.  ``By changing their plea today, Gary, Giles and
David have fully accepted responsibility for the significant lapse of judgment that led to the
filing of these charges, and that has caused them to be apart from their families and friends
in the United Kingdom for an agonizing 17 months,'' the statement said. ``We are grateful
to the prosecutors currently assigned to this case, who were willing to review these
charges with a fresh eye, and resolve this case based on the evidence.'' In the statement
of facts attached to their plea agreement, the bankers admitted that they had failed to
tell NatWest bank about the investment Fastow offered them. They didn't formally admit
that they had deceived NatWest about the value of the bank's stake in Fastow's
partnership. Werlein questioned Darby about that point before the men pleaded guilty.
``That's what we failed to disclose,'' Darby told Werlein. ``And the millions you'd make off
the deal?'' Werlein responded. Darby replied that while it wasn't part of their plea, the
bankers hadn't told the bank about profits they or Fastow would make on the deal.
The bankers' case is one of several that grew out of the December 2001 collapse of
Houston-based Enron, which plunged into bankruptcy after widespread accounting fraud
was made public.  In hearings earlier this year, the judge asked prosecutors about
potential flaws in the bankers' indictment that might require dismissal of their case. The
bankers also complained they were being denied access to documents and witnesses in
the U.K. that they need to defend themselves.

Black's Ravelston Must Pay $13 Million for Fraud Role
Bloomberg.com | 11/29/07 | Andrew Harris
Nov. 28 (Bloomberg) -- Conrad Black's Ravelston Corp., a bankrupt private holding company
used by the former media baron to control his newspaper empire, must pay $13 million for
its role in his scheme to defraud Hollinger International Inc. Ravelston, indicted with Black
and four other former executives of Chicago-based Hollinger two years ago, pleaded guilty
in March to fraud charges and agreed to pay a $7 million fine. In addition today, U.S. District
Judge Amy St. Eve in Chicago ordered the company to pay $6 million in restitution to
Hollinger, now known as Sun-Times Media Group Inc. Hollinger was once the third-largest
publisher of English- language newspapers, including the Chicago Sun-Times.  The chances
that Ravelston will be able to make that payment are ``highly remote'' and ``very
unlikely,'' said Robert Kofman, a senior vice-president for the accounting firm RSM Richter,
the company's Canadian court-appointed receiver, after today's hearing.  Black, convicted in
July by a federal jury in Chicago of three counts of mail fraud and one count of obstructing
justice, owns a controlling interest in Ravelston. That company held a controlling stake in
another bankrupt Toronto company, Hollinger Inc., which in turn held a controlling interest
in what is now Sun-Times Media.  Black, 63, is to be sentenced by St. Eve on Dec. 10.
Prosecutors have said they'll seek at least 15 years imprisonment.  Cooperation Ravelston
agreed as part of the plea deal to disclose any information it has on Black's and other
defendants' activities. Citing its cooperation, Assistant U.S. Attorney Eric Sussman today
asked St. Eve for leniency in imposing her punishment.  While St. Eve ordered Ravelston to
immediately pay the restitution, the company's attorney, Deborah Steiner, told the judge
that, at best, Sun-Times will hold an un-collateralized claim for that amount, filed with the
Canadian court where Ravelston's bankruptcy is pending.  Kofman said the company owes
more than $60 million to its collateralized creditors and that its greatest asset remains its
ownership interest in Hollinger Inc.  Because of that corporate ownership structure,
``we're going to have to see a substantial appreciation in shares of Sun-Times,'' before
Ravelston creditors can be repaid, Kofman said. Sun-Times has lost more than 79 percent of
its value in New York Stock Exchange composite trading this year. With shares hovering
around $1, trading has been halted several times since the price fell to 96 cents on Nov. 26,
the lowest point since 1994.
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